Charitable Contribution and Tax FAQ – Frequently Asked Questions

IF I MAIL MY CHARITABLE CONTRIBUTION IN DECEMBER, BUT IT DOESN’T REACH REJOICE UNTIL JANUARY OF THE NEW YEAR, FOR WHICH TAX YEAR SHOULD I CLAIM IT?

Claim the deduction on your previous year tax return. A check that is mailed to a charity is deductible in the year the check is mailed (and postmarked), even if it is received early in the next year. Example: Susan mails (and postmarks) her check in December 2016. Rejoice doesn’t receive the check until January of 2017. The gift is deductible on Susan’s 2016 tax return.

IF I MAKE A CHARITABLE CONTRIBUTION IN JANUARY, CAN I CLAIM IT ON MY PREVIOUS YEAR’S TAX RETURN?

No. Charitable contributions must be claimed in the year in which they are delivered to the church or the USPS (per  postmark).

Example: Mary writes a check to Rejoice on December 31, 2016, and deposits it in the church offering plate on Sunday, January 1, 2017. Her check is not deductible on her 2016 taxes. She can claim it on her 2017 tax return.

CAN I DEDUCT THE VALUE OF VOLUNTEER WORK I DID FOR REJOICE?

No. The value of personal services is never deductible as a charitable contribution. However, unreimbursed expenses you incurred in performing services on behalf of a church or other charity may be. For 2016, you can use a “standard mileage rate” of 14 cents to compute a deduction for any miles you drive in performing services for your church. Be sure to maintain accurate records.

Example: Ellery is a trades-man. He donates 10 hours of time to Rejoice repairs. He cannot deduct the value of his donated labor, but he can deduct the value of material he purchased in performing the donated labor.

Example: Seven church members go on a short-term mission project to Nicaragua. The value of their labor is not deductible, but they can deduct their unreimbursed travel expenses (transportation, meals, lodging) incurred in the performing of their project.

I GAVE $135 TO REJOICE WHEN I REGISTERED FOR A SPRING RETREAT. CAN I DEDUCT THAT?

No, assuming you received benefits (e.g. lodging, instruction, materials) worth $135 or more. Charitable contributions generally are deductible only to the extent they exceed the value of any premium or benefit received by the donor in return for the contribution.

Example: You pay $2,000 for a niche in the memorial garden on church property. The niche will accommodate two urns of ashes for you and your spouse providing a place of peace and reflection for your family and friends to come and remember you. This contribution is not tax-deductible since you are receiving a service in exchange for your donation that exceeds the fair market value of the amount contributed.

IS THERE ANY LIMIT TO THE AMOUNT OF MY CONTRIBUTIONS I CAN DEDUCT ON MY TAXES?

Yes. A contribution deduction ordinarily cannot exceed 50% of a donor’s adjusted gross income (a 30% rule applies in some cases). Donors who exceed these limits may be able to “carry over” their excess contribution and deduct it in future years

WHAT KIND OF RECORDS DO I NEED IN ORDER TO PROVE I MADE A CHARITABLE CONTRIBUTION?

For individual cash contributions under $250: You must have a cancelled check or a statement from the church containing the church’s name, and the date and amount of each cash contribution. In the past, donors could use other “reliable written records” to substantiate cash contributions. This was no longer allowed after 2006.

For individual contributions (cash or property) of $250 or more: You must receive a written receipt from the church that indicates whether you receive goods or services for your contributions (and if so, the value of the goods or services received). If you received no goods or services for the contributions, then the receipt must say so or indicate that only “intangible religious benefits” were received.

If you’ve made individual contributions of $250 or more, don’t file your individual income tax return until you receive a charitable contribution statement from the church that satisfies these requirements. Otherwise, your contributions may not be deductible. Cancelled checks cannot be used to substantiate cash contributions of $250 or more. Different rules apply for non-cash property valued at $500 or more.

I DESIGNATED MY CHARITABLE CONTRIBUTION TO A DESIGNATED FUND. IS IT DEDUCTIBLE?

That depends. “Designated contributions” are those made to Rejoice for a specified purpose. If the purpose is an approved project or program of the church, you can deduct the contribution.

Example: Your $100 gift designated to VBS is deductible. However, if you specify that your contribution be applied to a named individual, then no deduction is allowed—unless the church exercises full administrative and accounting control over the donated funds.

Example: You donate $200 to the church and instruct the business office to give the $200 to a specified needy family in the church. This contribution is not tax-deductible.

Contributions to a church or missions agency that designate a particular missionary may be tax-deductible if the church or mission’s agency exercises full administrative control over the contributions and ensures that they are spent in the furtherance of the church’s tax-exempt purposes.

Example: You donate $75 to a denominational mission’s agency and specify a particular missionary as the recipient. This contribution is tax-deductible, even though it names a missionary, so long as the mission’s agency has full administrative and accounting control over the funds.

Acknowledgment

From Church Law & Tax Report, “Your Charitable Contributions” by Richard R. Hammer, who writes and edits for that publication. Mr. Hammer holds a Jurist Doctorate, a Letter of the Law Masters, and is a Certified Public Accountant specializing in legal and tax issues for churches.

The above is provided for information only.  Please check with your financial adviser before relying on this information as your individual tax situation may differ.